Tax calculatorDubai
Corporate Tax in Dubai (UAE)
9% Tax, Free Zone Exemptions & Filing Rules
Since 1 June 2023, Dubai – along with the rest of the UAE – has introduced a federal corporate tax. This tax applies to the net profits of companies and other business structures operating in the UAE.
Corporate Tax in Dubai and the UAE
A UAE company’s taxable income for a given tax period is generally calculated based on its accounting net profit or net loss, as shown in its financial statements – subject to certain tax adjustments where applicable.
Practical Example for Clarification
Let’s assume a company based in Dubai generates a net profit of AED 1,000,000 in the given tax period:
- net profits of up to AED 375,000 per financial year are taxed at 0% – effectively a tax-free threshold
- any net profit exceeding AED 375,000 per financial year is taxed at 9%
This results in a taxable profit of AED 625,000 . The corporate tax due on this amount is 9%, which equals AED 56,250 . If any tax credits are available, the final corporate tax payable would be reduced accordingly.
Corporate Tax in UAE Free Trade Zones
Companies registered in a Dubai Free Zone or any other free zone within the UAE and meeting the criteria of a “Qualified Free Zone Company” are subject to Dubai corporate tax under specific conditions:
- 0% corporate tax is applicable to the so-called “qualified income”
- income that does not qualify as “qualified income” is subject to corporate tax at a rate of 9%
A company established in a UAE Free Zone that qualifies as a “Qualified Free Zone Person” and meets the relevant conditions can, as a rule, benefit from a 0% corporate tax rate on its qualifying income. However, such a company may choose to opt out of the Free Zone regime and instead be subject to the standard UAE corporate tax rules.
Criteria of Qualified Free Zone Companies
- maintain adequate economic substance in the UAE, with qualified income meeting the applicable legal requirements
- comply with UAE transfer pricing rules at all times and ensure proper documentation is in place
- not have elected to be fully subject to the standard UAE corporate tax regime
Business Sectors of Qualified Free Zone Companies
The qualifying business sectors include:
- manufacturing of goods and materials
- processing of products
- holding of stocks and other securities
- management of shipping companies
- reinsurance services, regulated by competent authorities
- fund management and asset management, also regulated
- central services for associated companies
- financial services and treasury activities
- aircraft financing and leasing
- sale and distribution of goods and materials
- logistics services
- all activities directly related to the above points
Facilities for Small Businesses in the UAE
In addition to the 0% tax rate on profits of up to AED 375,000 , small businesses with turnover below a specified threshold may benefit from the so-called “Small Business Relief.” This regime is available to UAE-based companies and self-employed individuals whose annual turnover does not exceed the limit set by the Minister of Finance and who meet the applicable conditions.
The following key points should be noted:
- no corporate tax is payable under the Small Business Relief regime, provided the company’s turnover does not exceed AED 3,000,000 per accounting period – this threshold applies for tax periods from 1 June 2023 until 31 December 2026
- if the turnover exceeds this threshold, the company will no longer qualify for Small Business Relief
- all income must be properly recorded in accordance with the applicable accounting standards
- companies belonging to a multinational group or qualifying as a “Qualified Free Zone Company” cannot request this relief
- tax losses during a period in which Small Business Relief was claimed are not transferable to subsequent periods
- unclaimed tax losses from previous periods can be carried forward in accordance with corporate tax law
- interest expenses incurred during a period with Small Business Relief are also not transferable – previous interest expenses without this relief can be carried forward according to corporate tax law
- if the regulatory authority detects that companies have artificially separated their activities to avoid exceeding the threshold, this will be considered an attempt to obtain tax benefits unfairly
UAE Sales and Value Added Tax (VAT)
If a company has a turnover exceeding the specified threshold of AED 375,000 , it must register for Value Added Tax (VAT).
Additionally, companies have the option to proactively register for VAT even if their turnover is below this threshold but exceeds AED 187,500 .
This regime is particularly aimed at newly established businesses with little or no initial turnover, allowing them to structure their affairs properly from the outset – including considering their Value Added Tax position early on.
Please note that the above overview is for general information purposes only and does not constitute legal or tax advice. It is intended to give you a first introduction to the UAE Corporate Tax regime and does not take into account individual circumstances. Each company and individual entrepreneur should obtain tailored professional advice before making any tax-related decisions.
If you have any questions about this topic or any other matter, our specialists and tax advisors will be pleased to assist you at any time.
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